Fred Zimmerman, Professor
Emeritus of Manufacturing Systems Engineering
and International Management at the University of St. Thomas
companies the key determinant of strong, competitive communities A Civic CaucusFocus on CompetitivenessInterview August
Dave Broden, Pat Davies, Paul Gilje (coordinator), Sallie Kemper, Dan
Loritz (chair), Dana Schroeder, Clarence Shallbetter, Fred Zimmerman.
By phone: Randy Johnson.
Zimmerman, Professor Emeritus at the University of St. Thomas, says
well-run, forward-looking companies, rather than public policies or
foundational competitiveness, appear to be the most powerful
determinant of a strong, competitive position for a community. He says
without good companies, a community will not be competitive and
probably will not be a very good place to live.
He observes that
Minnesota has not fared well in terms of retaining employment in key
industries, noting the departures of Control Data, ADC, Northwest
Airlines, the St. Paul Ford plant, Lockheed Martin and Burlington
Northern. He says the Control Data and ADC departures were probably
not influenced by public policy, but that the situations with the
other four companies were very poorly handled by the state
He believes that,
compared to education systems present in many other developed and
developing countries, Minnesota's education system is mediocre and not
Zimmerman holds that
within a certain range, taxes are not a big factor for companies
considering relocation. He says well-run companies care less about
public subsidies than about government doing what it's supposed to be
doing-maintaining roads, providing good schools and law enforcement,
building a well-prepared workforce and having even-handed courts.
Zimmerman is Professor Emeritus of Manufacturing Systems Engineering
and International Management at the University of St. Thomas. He has
taught at the University of Minnesota, Universidad Catolica in
Montevideo, Uruguay, and at the Czech Management Center in Celovice,
Prior to returning to
academia in 1985, Zimmerman had spent over 25 years in industry as an
engineer, manager, vice president and president, primarily with IBM,
National Computer Systems and an NCS affiliate company, CAMAX. He is
the author of numerous professional and technical articles and is a
frequent contributor to the Business Forum section of the Minneapolis
His most recent book,
Manufacturing Works: The Vital Link Between Production and Prosperity,
co-authored by Dave Beal, discusses the relationship between
manufacturing and community prosperity.
Zimmerman received his
B.A. in Economics and Statistics from the University of Minnesota,
attended the University of Southern California Graduate School and
received his Ph.D. in Strategic Management and Organizational Studies
from the Carlson School of Management at the University
of Minnesota. He and his wife, Joanell, have five children and have
housed over 90 foster children.
forward-looking companies, rather than public policies or foundational
competitiveness, appear to be the most powerful determinant of a
strong, competitive position for a community. Fred Zimmerman,
Professor Emeritus at the University of St. Thomas, added, "It works
both ways. The companies can help the community develop and the
community can help the companies in some low-key, but significant,
ways. Companies are precious ingredients to a promising future."
"If there aren't good
companies, there probably isn't going to be a competitive community,"
he continued. "It probably isn't going to be a very good place to
Companies can help
Communities can work proactively with companies to enhance the
prosperity of both. He made a comparison between Ottumwa, Iowa, and
Pella, Iowa. They're not far apart and are about the same size. Ottumwa
used to be bigger, but Pella has Pella Windows
and Vermeer, the company that makes machinery for moving trees, and
several other key businesses.
Another example, he
said, is Platte County, Nebraska. "That little town out in the middle
of the prairie has the highest concentration of manufacturing per
capita of any city in the country," he said. "It has a whole flock of
really well-run companies."
"If taxes and state
policies are the driving factor in how a community does
competitively," Zimmerman asked, "how come so many states have
counties and cities on the declining list and on the advancing list?"
He noted that the
interconnection between higher education and well-run companies is
very significant, but doesn't run only in one direction. Companies
like 3M and Honeywell do a lot of favorable things for universities,
like funding endowed chairs at the University of Minnesota and at St.
Thomas. "So it is bidirectional," he said.
Minnesota has not fared
well in terms of retaining employment in key industries.
"One of the problems for Minnesota," Zimmerman
observed, "is that it assumes there's going to be a lot of industrial
movement in a year. There isn't a lot of industrial movement." In 2008
through 2010, nobody moved anyplace. A few things shut down, but they
didn't move from one place to another. In any given year, he noted,
companies don't move very much, but they do expand in other locations
and shrink in existing locations. "That's a much more powerful
determinant of manufacturing employment," he said. Ninety-seven
percent of pacemakers are not built in Minnesota, he noted, but in
places like Puerto Rico and Holland.
"Minnesota has been
materially disadvantaged with several key cases," he said. "Some
involve the state, but many don't. He mentioned Control Data and ADC
and said those declines probably weren't influenced much by public
policy. But both Northwest Airlines and the Ford plant were very
poorly handled by the state authorities, as were Lockheed Martin and
Burlington Northern. There were no meaningful proposals for
integrating metal stamping into the Ford plant, when it looked like
the plant was going to close.
"We've lost some really
big companies," he said, "and that's something that should be
reviewed. Whether the declines of these major employers are caused by
public policy or their own internal shortcomings, the outcome is the
same. You lose employment and the community begins to stagnate."
well-done academic research can contribute materially to community
He noted the University of Minnesota's agricultural and horticultural
projects and the integration of the University and Medtronic are very
Thomas does about
18 projects every year with companies about their products that are
significant, as well.
Weak "me-too" education
is overrated as a contributor to community prosperity.
"In order for education to be a contributor," Zimmerman said, "it has
to be rigorous and it has to keep pace with a better-educated world."
Thirty years ago, if somebody from Korea
or China or other places in the developing world wanted to advance
their education, they'd come to the U.S. He said that's no longer
necessary, because there are now schools like China's Nan Ying
University or Sanata Dharma in Indonesia. "There are emerging, very
capable universities in other places," he said.
He quoted a high-ranking
official in the United Auto Workers who said, "The only place our
education system excels is in graduate education and that's beginning
to slip." Zimmerman said it's not because we're doing poorly, but
because other people are doing better. If we look at the students in
our graduate programs, many are from other countries and many of them
are going to go back home. He said probably the best engineering
school in the world is in India, the Indian Institute of Technology.
They accept one out of 10,000 applicants.
Compared to education
systems present in many other developed and developing countries,
Minnesota's education system is mediocre and not world class.
In some places in might even be poor, Zimmerman said. He noted that he
has taught five times overseas. In the high schools in the Czech
Republic, students are required to take four languages and take math
through differential equations. In Uruguay, students take three
languages and by the time they get an undergraduate degree, they have
approximately twice as many contact hours in their major field as
students have in the U.S. He said students who are not up to it go
into the trades.
education redesign can provide broadly based liberal arts education,
coupled with market-appropriate technical skills, along with the
cultivation of work and character traits sought by employers and the
He observed that this can be done at a lower cost and said some
schools, like Dunwoody, are providing this already.
He noted that when he
was department head at St. Thomas,
he once tracked student ratings by degree of the teacher. The student
ratings declined with every degree the teacher had. The people who
were teaching with bachelor's degrees, who were usually industrial
specialists, got very high ratings, because they had so much
industrial experience. He said it costs four times as much for a newly
minted Ph.D., who's never worked anyplace, to teach a class, as for
someone with experience, who may or not have a Ph.D.
At St. Thomas, the
people with business experience who were teaching are the ones who
drew the students. Zimmerman said those people didn't care about rank,
pay, tenure or governance. They just wanted to come and work with the
students. He said now St. Thomas is using fewer people with business
experience to teach some classes, but they remain teachers in many
accreditation, he noted, says 80 percent of the classes have to be
taught by full-time staff. "I would argue that the business
accreditation is harmful to the educational process," he said.
The major competitive
disadvantage shared by both the U.S. and Minnesota is not higher
wages, but too much overhead.
"It's overhead internal to the company (that's what helped kill
Control Data) and external overhead, like finance, services,
insurance, health care, government," he said. They have grown so much
that they're a financial burden to anybody who's trying to compete
doing anything. That's where we're out of line." He observed that some
dedicated and capable people work in these industries, but the
industries are too large and resistant to productivity increases.
He said health care is
also a big rising cost. Family health care is about 75 percent of the
usual beginning wage in manufacturing.
It's ironic that much of
the activity of higher education is aimed at training people for
noted that we're turning out accountants, middle managers and what he
called "functionaries." "But that's not making us more competitive,"
he said. "It could be argued that it's making us less competitive."
Our societies are not
prepared to compete, because everyone seems to want all of the
adjustments, sacrifices and behavior modifications to be done by
people other than themselves. Nobody wants to give up
anything or reduce their compensation, Zimmerman said. He noted that a
radiologist makes about $600,000 a year, while a manufacturing
engineer makes about $65,000 or $70,000 a year. "And they're both
about equal in terms of complexity," he said. "Somebody's going to
have to make some adjustments or we will not remain competitive."
Higher education must
become more efficient in preparing people for work and for life.
interviewer offered his impression that behind the scenes, a big
battle is going on between those who believe higher education is
supposed to prepare people for work and those who say it must prepare
people for life. Zimmerman said they're not mutually exclusive and
that we need to be more efficient in preparing people for both. He
said the level of student debt is not sustainable and that higher
education must get more efficient.
CEOs of companies that
emerged successfully from distressed situations tended to come from a
background in manufacturing or engineering.
CEOs from unsuccessful cases tended to come from finance. Zimmerman
reached that conclusion from a longitudinal study in his book The
Turnaround Experience. The study examined 16 companies over a 25-year
period. Despite these findings, he said, there has been a broad trend
away from CEOs with manufacturing or engineering backgrounds toward
those coming from finance. Those newer CEOs tend not to have the same
broad experiences with their communities as the earlier CEOs.
We need both good
adjunct professors, who bring work experience to the classroom, and
good full-time professors. In response to a
question about balancing rigor in education with the appeal to
students of adjunct professors with work experience, Zimmerman said
there's not a conflict. He noted that adjuncts are especially
applicable to something like manufacturing. "We shouldn't assume that
the 'war story' group does not have good theoretical background," he
said. "It can be applied and still be theoretical."
"We need a good
foundation with full-time professors, too," he continued. "What we
don't need is the mediocre to below-average professor who has tenure
and doesn't bring anything to the party, either good teaching or any
kind of war stories. If we could get rid of all those, it would cut
tuition by 25 percent."
Many MBA programs are in
interviewer observed that one big industry is the manufacturing of
MBAs. These programs employ a lot of people and employers support the
effort by sending employees to get their MBAs. However, recently,
Zimmerman said, companies are capping the tuition they'll pay and are
not sending as many people, so many MBA programs are in decline.
on location look at the community first and then the state. If the community is
a good fit, then other factors controlled at the state level will be
considered. But state policy is secondary to community assets in
weighing a location decision.
of Employment and Economic Development (DEED) lacks people with
industrial experience. Zimmerman noted that
when Winnebago Industries was going to build a new plant in 2004, nine
states sent unsolicited proposals. Minnesota's
ranked last. When asked why, he said, "In the first place, we don't
have anybody in DEED that's worked anyplace. They don't have
industrial experience." Some other states, like Tennessee and Indiana,
do have agency staff with that experience. Second, he said, there's no
database that supports Minnesota's economic development efforts.
"We're not as bad as we
are disorganized," he said. "We're not taking the steps that other
economic development organizations take."
Within a certain range,
taxes are not a big factor for companies considering relocation.
said the quality of the labor force, the location of customers, and
many other things rank higher than taxes. He said, though, that
Minnesota is edging toward the top of that range and we ought to be
An official with a
company Minnesota was trying to recruit some years ago told him, "We
don't pay much attention to taxes within a certain range. But we pay
lots of attention to state spending, because we know that if that's
going up, the taxes are going to follow."
Well-run companies care
less about public subsidies than about government doing what it's
supposed to be doing. Zimmerman said he
suspects that well-run companies aren't very interested in the
giveaways that states are offering. "They do care about governments
doing what they're supposed to do," he said. They want them to build
and maintain roads, have good schools, have good law enforcement,
even-handed courts and a well-prepared work force.
The Civic Caucus
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David Broden, Janis Clay, Bill Frenzel, Paul Gilje,
Jan Hively, Dan Loritz (Chair), Marina Lyon, Joe Mansky,
Tim McDonald, John Mooty, Jim Olson, Wayne Popham and